Weighing the Week Ahead: Economic Sunrise?

We have a big economic calendar with reports on inflation, small business optimism, retail sales, consumer confidence, and unemployment claims.  I expect the data to continue occupation of the back seat.  The election news is easy to write about, and financial media are taking the bait.  Anything about the pandemic is newsworthy.  Most important will be the fate of moves to extend economic assistance to the unemployed and others.

Many pundits have been unduly pessimistic about the economic rebound.  That has also been my viewpoint.  I am accepting a reader suggestion to think carefully about my conclusions.  What would make me bullish?  Put another way:

Are we witnessing an economic sunrise?

Last Week Recap

In my last installment of WTWA, I raised concerns about the accuracy of the upcoming payroll employment report.  I described the problems more completely in a Wednesday preview and another post after the release.  Employment was a big topic during the week, of course, but no one else has joined in about my specific concerns.  The actual job count will be available in about six months.

The Story in One Chart

I always start my personal review of the week by looking at a great chart.  This week I am featuring Jill Mislinski’s version.  Her chart combines much of what interests us in one picture.

Once again, there was little change in fundamental values or news during the week.

The market gained a strong 2.4% on the week with a trading range of only 2.1% (after Monday’s gap opening). My weekly indicator snapshot monitors the actual volatility as well as the VIX (see below).

The weekly sector chart shows the sources of the action.

The “recovery” trade is still leveling but remains in “improving” territory. Industrials, financials, energy and materials are all part of that group.  Defensive sectors like utilities, consumer, and health, continue to improve.  You can watch the progress of the rotation via this chart.


Statista continues excellent coverage on important questions.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations.  I avoid using my personal preferences in evaluating news – and you should, too!

New Deal Democrat’s high frequency indicators have always been a valuable part of my economic review. They are especially important as we all try to monitor the economic recovery.  His weekly report remains positive in the long leading and short leading indicators and has improved to neutral on the nowcast.  He views the current rebound to be dependent on the continuation of emergency unemployment benefits.

The Good

  • Light vehicle sales for July improved to 11.19 M (annualized) from June’s 9.58. “Davidson” via Todd Sullivan explains the importance and also why interpreting stats in this recession is a different challenge.
  • Mortgage forbearance plans fell by 101,000.  About 4 million homeowners remain in active forbearance, 7.5% of all mortgages. (Calculated Risk).
  • ISM Manufacturing for July registered 54.2 beating expectations of 53.4 and June’s 52.6.
  • Factory orders for June increased 6.2%, better than expectations of 5.2% but weaker than May’s (downwardly revised) 7.7% gain.
  • ISM Non-Manufacturing for July was 58.1, much better than expectations of 55.2 and also ahead of June’s 57.1.  (Jill Mislinski).
  • Initial jobless claims declined to 1.186M, historically high, but significantly better than expectations of 1.4M and the prior 1.435M.
  • Rail traffic is showing improvement.  See Steven Hansen’s (GEI) innovative look at the economically intuitive sectors.
  • Continuing jobless claims declined to 16.107M from the prior week’s 16.951M.
  • Corporate earnings reports have soundly beaten lowered expectations.  FactSet reports record high levels of earnings beats (83%) and the margin of outperformance (22.4%).  Revenue is also beating the five-year average in both number and margin.

The Bad

  • Construction spending for June declined -0.7%, worse than expectations of a 1.3% gain, but better than May’s 1.7% decline.
  • MBA mortgage applications declined 5.1%, worse than the prior week’s -0.8%.  As the regular chart from The Daily Shot shows, the purchase index remains at very high levels.
  • ADP private employment grew 167K versus expectations of a gain of 1.6M.  The June report, however, was revised from a gain of 2.639M to 4.314M.  The massive revisions, induced by a desire to match and/or forecast the BLS result, are reducing the value of this information.
  • Nonfarm Payrolls for July increased 1.763M, lower than expectations for 2.0M and June’s gain of 4.719M.  Other aspects of the employment situation report (hourly earnings, hourly earnings, unemployment rate, etc.) were somewhat positive.  This suggests a weak situation that is improving slightly.
  • Imminent end of COVID-19 relief as Congress and the President could not come to an agreement on extensions.  The President, though an executive order, extended unemployment benefits (on different terms), delayed payroll tax requirement, and extended protection on mortgages and student loans. We can expect discussion on the legality of these orders.A screenshot of a cell phone

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The Ugly

Lebanon – a toxic brew of political unrest, economic weakness aggravated by a COVID lockdown, spreading COVID cases, and a deadly explosive catalyst.

The Week Ahead

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.

The Calendar

We have a big calendar, featuring inflation data, small business optimism, consumer sentiment, retail sales, and jobless claims.

Earnings season has wound down, but we can expect even more political news along with pandemic updates.

Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.

Next Week’s Theme

As has been the case for months, the economic specifics will be less important than the interplay of pandemic and the economy.  My analysis of this has been extensive and timely, but my conclusions are not popular.  The genesis of this week’s topic came from a reader comment.  I described it to Mrs. OldProf as a loyal reader who felt I had spent too much time in the desert sun.  Naturally, she challenged me and wanted details.  I had to admit that it was actually an extremely courteous observation that my viewpoint might be influenced by living in a COVID_19 hot spot.  Upon reading the comment to her, she translated it as a reasonable request to consider the other side.  As usual our conversation moved to the Packers, our insulted QB, and whether we would actually have a season.  But she had done her job.

I was convinced.  Whenever you have a viewpoint, you should periodically ask yourself what would change your mind.  This is not the exact request from my reader, but it sparked the idea.

Perhaps we need to ask:

Are we enjoying an economic sunrise?

Good things must start somewhere.  Have recent stock moves confirmed the optimism on several important fronts?


There is an intense search to explain current market prices, resulting in many theories.  Here are a few.

Tom Lee, Fundstrat Global Advisors, has been bullish and right through the rally days.  He sees a big breakout and is willing to make a forecast with a date:  Next Week!

The Fundstrat team finds that it takes 20 days after the cases have peaked for the rally to begin.  That would be August 14th.

Bill Miller, Miller ValuePartners’ founder and CIO.

Challenged with the data on “pandemic pivots” in an interview by Consuelo Mack, he cited the following bullish observations:

  • The market’s fall in March of this year represented an excellent buying opportunity, according to Miller, who underscored his belief that people are underestimating values. Given the backdrop of low interest rates and no inflation, Miller says, “we can get valuations that go much higher, so buying now is a good thing.”
  • His firm’s tech holdings (it owned Facebook and Amazon as of their IPO dates) do not fly in the face of his value investing philosophy, says Miller.
  • Miller says the degree to which debt concerns him is dependent on a company’s cash flow and interest coverage. It worries him more in capital intensive, commodity businesses (like oil), he notes.
  • Regarding the hit taken by the airline industry due to the pandemic, Miller contends, “if you had airlines and sold them, you were effectively betting against a vaccine or effective treatments.” He believes airline traffic will come back “faster than the current stock prices would indicate. Right now, I’m not betting in favor of a vaccine, but I’m not willing to bet against it.” He notes that only one case of Covd-19 could be traced to flying in an airplane and believes strongly that traffic will gradually come back as people become more comfortable. Airline holdings also offer diversification, he adds.
  • Miller has no concern regarding financials and describes them as “among the most attractive areas of the market today” given their strong capital positions and profitability. Even with the stress of the pandemic, Miller claims that financials “aren’t getting worse, they’re getting better.”
  • On a more macro level, Miller argues that the market is “taking too dire a view of perceived risk” relative to the real risks presented by the current environment. “When people are fearful,” he says, “their perception of risk changes dramatically”—which is what happened with the market went from an all-time high to a bear market in four weeks.

Howard Marks, Oaktree Capital Management provides many interesting ideas in his latest report to his investors.  I urge you to read it all, which includes his account of recent events, policy reactions, and mistakes by all.  Many of these echo the problems I have written about.  There is a long list of continuing worries, but today’s mission is to ferret out the bright side.  Here are his comments on that front:

The first is that many investors have underestimated the impact of low rates on valuations. In short, what should the stock market yield? Not its dividend yield, but its earnings yield: the ratio of earnings to price (that is, p/e inverted). Simplistically, when Treasurys yield less than 1% and you add in the traditional equity premium, perhaps the earnings yield should be 4%. That yield of 4/100 suggests a p/e ratio (the inverse) of 100/4, or 25. Thus the S&P 500 shouldn’t trade at its traditional 16 times earnings, but roughly 50% higher.

Even that, it’s said, understates the case, because it ignores the fact that companies’ earnings grow, while bond interest doesn’t. Thus the demanded return on stocks shouldn’t be (bond yield + equity premium) as suggested above, but rather (bond yield + equity premium – growth). If the earnings on the S&P 500 will grow to eternity at 2% per year, for example, the right earnings yield isn’t 4%, but 2% (for a p/e ratio of 50). And, mathematically, for a company whose growth rate exceeds the sum of the bond yield and the equity premium, the right p/e ratio is infinity. On that basis, stocks may have a long way to go.

Then he reviews arguments about the narrow leadership from tech companies.

Thus, it’s said, the skeptics seriously underestimate the ability of the technological leaders to grow, and to pull up the overall growth rate for the universe of common stocks. They grow every day, and so does their representation in the equity indices and in corporate America, creating a virtuous circle.

Thus, with these dominant large-cap tech companies making up a large and growing percentage of the stock market, to be bearish one has to have a thesis on why they should fall. Or else you would have to bet on the non-tech sectors to decline a great deal and pull down the averages – despite the fact that they’re already down a lot.

His final thoughts do not reach a clear conclusion – which seems about right!

Paul Schatz, Heritage Capital LLC.

The bulls have run hard this week although the window of opportunity for a decline has not closed yet. There are all kinds of cracks in the market’s foundation. So far, each and every time the market has just run over them. And before someone asks, the answer remains yes. I am still very concerned about the outperformance in the NASDAQ 100 and those 5 stocks in particular versus the rest of the market. No matter how you slice it, the fact that Apple, Amazon, Facebook, Microsoft and Netflix have been ubiquitous and dominate the various indices they are of is not a good thing.

I have no idea how this party ends. The fundamentals make perfect sense. The macro picture makes perfect sense. I only know from 32 years in the business that when everyone owns certain stocks and no one can find fault, it usually does not end well. And I am not talking about no earnings, no revenue stocks from the Dotcom Bubble. GE comes to mind as a stock that everyone owned and could no wrong. Wall Street fell over itself praising and upgrading it for years, right into its all-time high in August 2000. 8 years later it was almost insolvent.

Attempting to Meet the Challenge

I will review the key areas where I have worries.  In each case I will identify both what bothers me and how I might be reassured.  Please note that I am not looking for perfection on all fronts, but I am hoping for serious improvement.


Permanent improvement in the economy and higher stock prices depend on taming the pandemic.  This can be done in various ways, but is it a requirement.

  • Vaccine
    • Adequate production – accelerated actions are helping with this.
    • Poplar compliance – a problem at the moment, but improvement may come.
  • More testing and tracing.  (Bill Gates).  Many do not understand the entire testing question.  It has been muddled in politics.  This is the best path to what I call a “balanced solution” where reopening is accelerated while the most vulnerable are protected.

In an interview with CNBC on Monday, Bill Gates had sharp criticism for the United State’s COVID-19 testing system, calling it a “complete waste” that requires a much shorter turnaround period to be truly effective.

“You should not reimburse somebody for getting a test that takes more than 48 hours to get a result back,” Gates said on CNBC’s “Squawk Box.” “That test is a complete waste. And to all these numbers about how much we test, the majority is just a complete waste. You need to get [a test] back as soon as possible so that somebody can change their behavior — so that they’re not infecting other people.”


Economic recovery will not be complete until business reopening or replacement is nearly complete and those who seek jobs can find them.  Most observers are accepting the data at face value to determine where we stand.  I am looking for more.  We need a critical look at indicators to make sure that the violent moves have not destroyed their relevance.  We should also put “diffusion” indicators aside for now.

  • Continued low inflation.  “Davidson” (via Todd Sullivan) explains how this can justify valuation.

The 12mo Trimmed Mean PCE is reported 1.82%, down from last month’s 2% with the past 6mos revised lower. Lower inflation translates into higher Value Investor Index(VII) valuation to $2,583 for Aug 2020 with SP500 at $3,235, a 24.2% premium. The SP500 peaked in 2000 and 2007 at 100% and 65% premium levels respectively vs the VII. Those levels represent well over $5,000 in today’s low inflation environment.

Market prices represent investor perceptions of economic activity. As long as economic activity trends higher, equity prices trend higher. Coupled with falling regulations, tariff initiatives and lower taxes, the US remains in a strong economic trend implying that if conditions continue equity prices should trend significantly higher the next few years.

  • Reliance on beating expectations, improvement over last month, and similar measures.  We should have the standard of approaching old and/or potential levels.


Leaders of all types must be better informed and more serious about the problems.  This could apply to political actors in all branches and levels of government.  I am astounded by the lack of knowledge about issues and methods.  The idea of a coherent plan on any government level has been a challenge.  If this were to improve, I would definitely be more bullish!

In order to avoid the sharp edges of the current political climate, let me suggest these examples.

State and Local Government Finances

Corporate Earnings

Stock values depend upon earnings expectations.  I monitor these closely and urge readers to do the same.

  • So far, advance earnings have strengthened.  Brian Gilmartin provides the best regular updates on this subject, so I watch his blog closely.  The sell-side analysts have a good ear for corporate expectations.  So far, these have been holding up.
  • Acceptable market valuations depend upon the “forward earnings yield” versus alternatives.  Confidence in the earnings expectations is a crucial element in what valuation is deemed to be appropriate.

Market Action

Broader strength in the market is essential.  The punditry is struggling to provide excuses for the narrow market leadership.  As Paul Schatz notes (above) this is a warning sign.  Let us hope that Tom Lee (also above) is correct on the broadening of the market rally.  I believe he will be correct on the “other side” of the recession but is too optimistic about when we will see that.

I have a few other conclusions in today’s Final Thought.

Ideas for Investors

I have switched the investor section to a separate post.  I hope to run it nearly every week, calling it Investing for the Long Term.  So far, I have failed in that aspiration, but I hope to do better.  During the last week I wanted to write about the problem in the payroll employment report. My semi-retirement (ho ho) time is more limited, and I want to emphasize what I think is more important.  Since I do not believe there is a rush to add investments, I want to emphasize the issues discussed in today’s post.  I plan to do a new investment piece next week.

A Personal Favor

Please consider joining the Great Reset group.  This is the key driver behind investment commentary. You will get updates about what is being studied and can join in the process.  There is no charge and no obligation, but I hope you will join in my Wisdom of Crowds surveys. I need more wise participants!  I have just beta-tested the new survey and it will go out on Monday. The results of our team effort will be published on a regular basis, so you will be joining me in contributing to a greater good.

We have already identified key sectors to avoid as well as those worth further examination. Articles in financial publications are only now catching up.  Members have avoided some of the most dubious ideas, but there is still time for new members.  I have created a resource page where you can join my Great Reset group. 

Quant Corner and Risk Analysis

I have a rule for my investment clients.  Think first about your risk.  Only then should you consider possible rewards.  I monitor many quantitative reports and highlight the best methods in this weekly update, featuring the Indicator Snapshot.

For a description of these sources, check here.

Despite the improving technical indicators, I continue my rating of “Bearish” in the overall outlook for long-term investors. We should also keep watch on the increase in anticipated inflation.  So far it has not affected bond prices (Thanks, Chairman Powell) but it eventually will.

The C-Score remains at levels never before seen. It is combining the sharp economic rebound with pandemic effects.  When we are able to separate the two, a current mission of Dr. Dieli, it will provide more guidance on the timing and extent of the recovery.

The Featured Sources:

Bob Dieli:  Business cycle analysis via the “C Score”.

Brian Gilmartin:  All things earnings, for the overall market as well as many individual companies.   This week Brian also takes note of the improvement in corporate credit spreads.

David Moenning: Developer and “keeper” of the Indicator Wall.

Doug Short and Jill Mislinski: Regular updating of an array of indicators, including the very helpful Big Four.

Georg Vrba: Business cycle indicator and market timing tools.  Georg’s iM-Weekly Employment Monitor shows “no sign of a recovery.”

Guest Commentary

Conference Board data shows the recent increase in consumer inflation expectations.

James Picerno ponders the possibility for negative real yields.

Meantime, the demand for safety and an expectation for firmer inflation co-exist. If recent headlines are a guide, it’s not difficult to imagine that these two trends could persist for the foreseeable future. That may drive some observers batty, but Mr. Market answers only to himself in setting prices. The truly tough part is left to mere mortals: explaining the rationale.1

And based upon the last 34 years of data, the Fed is likely to be on hold for a long time.

Final Thought

This was a challenging exercise.  I did my best, but there is plenty of room for criticism and commentary. I always welcome reader reactions, but especially on this post.

The biggest difference between me and the world?

Most managers and pundits need to sound smart by explaining what everyone already knows and implying that their actual positions captured recent moves.  They are motivated by driving page views and getting on TV.  I don’t need to do that.

I began writing because I thought I had a message.  Even though I have been right (and for the right reasons) for many years, it has not been the best marketing plan.  Stubbornly, I stick to my guns.  I can see that much of the popular economic analysis is superficial.  If I were still at a prestigious university, I could write about that with authority.  In my semi-retirement I can analyze information that will help clients and readers, but I regret that I do not have more reach.  It is ironical that knowing much more than I did as an Assistant Professor gives me less authority! If there is one troubling aspect of my current life, it is that I cannot help more investors do as well as I have.  The key to this:

Be willing to challenge conclusions of the big names.

I’m more worried about

  • The China challenges are somewhat under the radar, despite increasing small disputes.
  • The train wreck of electoral politics in the face of needed action and coordination remains on my list of worries. Electoral motivations are supposed to be how democracy works, but this is painful to watch.

I’m less worried about

  • The upcoming election.  It is everyone’s hot topic and the cover story for Barron’s.  I’ll write a post at some point, but for now I do not see it as important.  Outcome not known, policies not known, ability to implement not known.
  • Local conditions.  Arizona cases seem to be improving, but I remain cautious on my rare excursions.

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  • JK Edinburgh August 9, 2020  

    Great Post OLDPROF as always, mandatory reading for the weekend. “Are we enjoying an economic sunrise?” ,as a lifelong optimist the indicators of change are IMO beginning to appear and you have highlighted several all worthy of further study, thank you.
    PS The New Briefing format also works very well for me as a Mac user.

  • Tom Summers August 9, 2020  

    You have been a great help to me over the years.

  • John Malcolm August 9, 2020  

    USA Daily New Cases is potentially misleading because of reporting delays of national statistics averaging one or two weeks. This makes the recent past look better than it is.

    I was a little confused in this issue between your opinions and the ones you were quoting not being clearly demarcated.

    Otherwise, a mature consideration of a situation for which there is no good answer.

    Stay safe!

  • MsTek August 9, 2020  

    I am not a finance person- I am an IT person. That being said, one thing I do know is disruption.

    Try as the naysayers might, the old “normal” is done. We are never going back to the way things were. There has been disruption and in this disruption, winners and losers, evolution, and extinction. Eventually, bars will open and restaurants, sports, and entertainment. People like to socialize and as painful as things are right now, that will eventually come back. What isn’t going to come back is work as you know it. The large offices are dead if you can work from home. That push to remote work was pushed 10-15 years ahead by this pandemic. Offices will reopen but more along the lines of co-working spaces where you drop in for a day, maybe two, but your primary work (if you are a knowledge worker) is home. Because of this, that’s why Amazon, Apple, Netflix, M$ are doing so well and will continue to do well until the next big disruption in computing/work happens. Nobody kills Amazon right now. You need their things to work from home, be at home, quarentine at home. The best way to look at Amazon is like Sears and Robuck at the turn of the last century. Amazon sells everything. Amazon is easy to use. Amazon has the infrastructure. You just don’t kill their model until you figure out a way to beat their supply chain. Their stock is insane but again, who compares? Walmart? Apple sells because of its name (again, I’m IT and I have an opinion about Apple, clearly, but if people like it, they like it.)

    “Normal” is a new normal. Until this pandemic fades, it is what it is. Personally, as I stated before, I fear for the dollar… but what I fear more is my passport being useless and having nothing to retire on. Amazon is going to be fine until someone kills them with a different model, just like what killed Sears, Woolworths, Ames, Kmart, and all the other dead stores.

  • Andy Saks August 9, 2020  

    Could you please increase the size of the font for us old folks. The size and darkness used by SA is OK.

    By the way, I always print your articles to PDF so I can go back and reference them. When printing from your new Dash of Insight blog your header also prints, thus cutting off some info and making reading that much more difficult.

  • David Lincoln August 9, 2020  

    Love your courage Jeff.

    Been reading you weekly since 2011. You were right then, recommending we all stay invested (when many were bouncing out fearing a double-dip recession, even I doubted at times back then), and I have every reason to believe you’ll be proven right now. A year from now you’ll add another proofpoint to the trophy case.

    Not sure if there’s a Millerhead fan club out there but sign me up if so.

  • John Malcolm August 9, 2020  

    @Andy — have you tried “File – Print Preview – Simplify Page” and then print to PDF? You can also adjust font size and paper orientation from that menu if you have to. Make sure “Shrink to Fit” is not selected (although switching to Landscape will help font size in that case). The big issue is the very wide charts on some of the pages.

  • Doug August 9, 2020  

    As always, this was a valuable, informative piece. I find your analysis the very best I have seen and I read a lot of them. Thank you.

  • Peter Goulet August 9, 2020  


    An interesting post. I would make three anecdotal obligations. We may perhaps be soon seeing an economic sunrise but I cannot be as optimistic as you are when 22 mil people say they don’t don’t know how they will pay this month’s rent. Trump may have saved them for a while, assuming his ploy actually works, but no sunrise can absorb 22 mil more homeless. One of those folks has been cleaning my house and she didn’t make it this month and I’ve lost touch with her. Besides I know you know that business is not the same as the market.

    Kansas City is in the early stages of completely rebuilding its airport. The project will cost at least $1.5 which we are counting on our current airlines to pay for based on them staying committed and giving the city $10/head for five years for payment. Already traffic from larger users, is off like 90%. Even an optimistic estimate of flight levels is off as much as 60% well into next year. We’ll still owe for the bonds and if any of our carriers declares bankruptcy that will most likely wipe out their obligation. More than that many of our largest customers such as Cerner, T-Mobile, and Burns and McDonnell have discovered that working from home and hybrid work arrangements have created a change in thoughts as to the value of direct contact. Cerrner, has recently been a source for something like 150,000 boardings a year and is now down to 100-200 a week and not uncomfortable.

    My daughter is a supplier of IT and data services to Pharma firms like Pfizer, Gilead, and Astrazeneca. Based on info she has gleaned from speaking to her industry contacts she is convinced that no viable vaccine can be generally made available before March next year. Only Moderna is in an actual stage 3 trial. The rest aren’t scheduled until late October or November (at least that is what I was told when I was accepted into the volunteer pool. Even though Moderna likes their chances the current trial will require two spaced doses per patient and a three month wait to see if any antibodies that might be created actually last long enough to provide some immunity. Even if it works 100 million doses will have to be administered just to cover the highest risk individuals. Not this year.

  • Lisa August 9, 2020  

    Thank you very much for another great article. The new website looks great.

    I read those articles.

    Here’s a link from back in May: https://www.npr.org/2020/05/12/854363884/u-s-treasury-to-borrow-3-trillion-to-finance-pandemic-relief-programs

    My take is that yes, there are all the leading narratives. There are very little accountable amount of any of the actual disbursals based on any of the legislation. To me there is a lot of talk and absolutely no honest accounting of anything anywhere. I really like your charts and analysis. However, because of my real skeptical view about no accountable data, I think that all of the analysis is becoming reporting about correlations where it may be so bad, as to be practically irrelevant for any reflections of real tracking based on totally “suspect” data.

    today, most of the trading is accomplished by AI, HFT software. The focus on “emotional” decisions as any kind of motivation to me is totally suspect, and by this time NOT relevant anymore. I think there is such an extreme disconnect of the majority of the population’s real predicament in this present economy that is NOT being indicated or reported by any of the questionable data.

    At this time, the only evidentiary facts will probably be whatever unemployment totals hit the news from any of the proprietary software that is owned by private companies that are negatively affected and become “at risk” in bankruptcy proceedings.

    I expect that the Federal data will reflect certain critical data based on “NO TAX REVENUES” within the next 6 months, along with whatever unemployment data surfaces through vulnerability cracks of proprietary private data systems.

    Right now, I think the late FED-ST Louis Labor reports that show the negative effects for “local government” employment, and those show a significant negative drop. as the most relevant indicator as to the real predicament that will be hitting local communities in this coming year. Just depends if State Unemployment Trust Funds, and State Budgets are totally decimated during the next 6 months.

    The few leaders of the Nasdaq do NOT employ enough of the US population to indicate or reflect any real information about just what part of any of GDP production is even redistributed back into the mass economy at the lower 4 quintiles of the US demographics.

  • Sentiment Al August 9, 2020  

    It’s good to question one’s assumptions and challenge one’s conclusions, but it’s equally good to stay true to one’s judgment in the face of disagreement. That’s a quality that makes your posts valuable.

    Of the analysts I follow, several others share your bearishness and, FWIW, every one of those has been getting quite a lot of dissent from their followers during the past 3-4 weeks. I’m not sure what that means other than than it’s difficult to stick to ones guns in the face of a market going the other direction. It’s good to remember than “patience” and “stubbornness” can look the same but really aren’t.

  • John Malcolm August 9, 2020  

    I came across an interesting short article on Bloomberg that seems relevant:


  • wkevinw August 9, 2020  

    The virus is obviously the main unknown.

    Things will get to be “more” normal when some more questions are answered, such as below.
    – How persistent is immunity?
    – Can herd immunity “solve” the problem? how long does this take? what’s the best way to manage?
    – Vaccine: effectiveness rate, persistence, side effects?
    – Therapies- degree of difficulty?- they have gotten better, even though this does not get much media attention. (e.g. ventilators aren’t that great for this disease).

    It is possible that herd immunity will appear “unexpectedly” due to asymptomatic infections.

    As far as government responses: people want somebody to be in control because they feel powerless and unsafe. People who actually deal with “real world”/tangible issues (with safety problems), know that this isn’t the way the real world works most of the time.

    Even if the current administration in DC gave perfect advice, the media would destroy it. (the reason that advice is not forthcoming is because there isn’t “perfect” advice).

    As with many issues, more local government entities need to step to the plate. Each state has health administrators (usually with MDs). Should they just wait until POTUS phones them with instructions? If so, a lot of money could be saved by not paying for this state-government position, and not putting people through med school. (just wait for the POTUS to tell us what to do!)- It was like this with some of the medical supplies- so the POTUS is responsible to be the procurement officer for state-run health systems? I hope somebody can see how ridiculous this is.

    We still do not have enough technical info on the virus.

    The equity markets may be saying that it’s not as big a deal as many of us think, and/or the questions above will be answered shortly. Let’s hope this is the outcome.

  • Ben Reppond August 9, 2020  

    Thanks Jeff for helpful insights.

  • Mike N. August 10, 2020  


    I loved this posted.

    My analysis of this has been extensive and timely, but my conclusions are not popular.

    Indeed. They rarely are. That is why you are one of the most valuable/well respected bloggers that I am aware of. I don’t read you to get a parroted version of the opinions spouted by pseudo-economists & populist analysts every day on CNBC.

    Are we enjoying an economic sunrise?

    Who knows? As far as I know, this is everyone’s first experience with an economic shutdown induced by a global pandemic. We have no experts (including Bill Gates). Even our greatest teacher, Warren Buffett, appears completely thrown off his game…which is a gentle description of what I saw from the Annual Shareholder Meeting.

    Personally, I think anything that may (or may not) happen between now and the time we get a vaccine could either be destructive, helpful or benign…

    How’s that for going out on a limb!!

    I remain confident we will have a vaccine in record time. I just don’t know exactly what “record time” will be. Things seem pretty hopeful for some time between October 2020 and October 2021. But, even that is probably just a 70% chance (certainly not a “mortal lock”).

    Until that time, I am going to say that it is OK for everyone to just say, “I don’t know”.

    To: Warren Buffett, Jeff Miller & Jeremey Siegel:

    I thank you for your years of wisdom and your endless willingness to help me become a better investor. And, since I have just as much experience as each of you investing during a pandemic, I would like to dare to give advice to each of you (for a change):

    It’s OK. You are all still enormously respected. But, during this unprecedented set of circumstances, I am giving everyone permission to say: “I don’t know”. I am certain that when the clouds begin to lift, your vision will be as clear (and valuable) as ever…if not more so.

    • oldprof August 12, 2020  

      Thanks, Mike.

      The next step will be to get people to take the vaccine, a subject of my latest Great Reset poll. More on that soon.


  • Gary Alvord August 12, 2020  

    I thoroughly enjoy reading your weekly content on a regular basis. Thank you!

  • Mike N. August 18, 2020  


    On the subject of re-thinking a position:

    I don’t have the slightest interest in gold. I like understanding what works and what doesn’t in human systems. To me that’s not optional; that’s a moral obligation. If you’re capable of understanding the world, you have a moral obligation to become rational. And I don’t see how you become rational hoarding gold. Even if it works, you’re a jerk.

    Berkshire late Friday disclosed that it held a $565 million stake in Barrick Gold Corp., the world’s second-largest gold miner, at the end of the second quarter. The stake makes Berkshire the 11th-largest shareholder in Toronto-based Barrick, according to FactSet.

    • oldprof August 23, 2020  

      Mike N.
      Right. My guess — and just a guess — is that there will eventually be a discussion about owning a mining company versus physical gold.

      Would you have considered owning a hula-hoop company? Hmm, but maybe you are too young!